New South Wales regulators are scheduled to meet on Wednesday to decide whether to allow Crown Resorts to open its multibillion-dollar Crown Sydney casino hotel next month
The timing indicates that a courtroom showdown may be imminent since Crown has given no indication that it will delay the planned December 14 opening despite the unanimous opinion of legal counsel advising the state’s Independent Liquor and Gaming Authority that the company is unsuitable for licensing.
That opinion, delivered separately and in scathing terms by a trio of senior lawyers, is based on months of investigation into Crown’s affairs which the ILGA commissioned in response to an explosive media exposé into massive corporate misgovernance at the company promoted in large part by controlling shareholder and former Chairman James Packer.
Topping the list of misdeeds was a VIP gambling business at the company’s flagship Crown Melbourne casino operated in partnership with junkets with alleged ties to organized crime and where anti-money laundering laws and regulations were routinely flouted.
The inquiry also focused on how the company’s aggressive pursuit of that business led to the arrests in 2016 of 19 employees in China for violating the country’s prohibitions on recruiting its citizens to gamble.
It was revealed that Packer, who owns 36 percent of Crown’s ASX-listed stock but holds no official position with the company, regularly received confidential trading updates from management as he sought at various times to sell all or part of the company, including an abortive 2019 sale of 19.9 percent of the stock to Macau casino operator Melco Resorts and Entertainment that would have violated the terms of the Sydney license.
It was revealed also that in a series of 2015 e-mails Packer threatened a private equity executive with physical violence.
Crown has since suspended all junket operations and has promised to address the governance problems. But the steps the company is taking are “too little too late,” according to Naomi Sharp, one of the three legal advisors. It’s her view that “Crown Sydney is not suitable to hold the license and Crown Resorts is not suitable to be a close associate of the licensee.”
“We say that the failure of Crown Resorts to meaningfully act on these longstanding allegations about the junket operators bespeaks both a culture of denial and a culture of arrogant indifference to regulatory compliance,” she said.
The inquiry isn’t scheduled to deliver its final report until February. But it’s Crown’s apparent refusal to heed the suggestion of Patricia Bergin, the former Supreme Court judge heading the probe, that it postpone at least the casino portion of Crown Sydney, that has prompted the meeting this week, which could include “limited or restricted opening scenarios,” according to Victor Dominello, the government minister responsible for gaming.
“I am receiving regular updates from (the ILGA) and am encouraged that they have now scheduled a special meeting for 18 November to attempt to resolve the conditions of Crown Sydney’s opening in December,” he said.
New South Wales Premier Gladys Berejiklian has said also that she is prepared to abide by whatever the ILGA recommends.
“I will get advice from the ILGA as to whether (the opening) should proceed in December and I am willing to take a decision not to if that’s the advice.”
Yet, it’s a dilemma for the authority, which isn’t expected to recommend pulling the license or anything so harsh as to cost thousands of jobs at the A$2.2 billion resort or unduly punish tens of thousands of victimized Crown shareholders.
There is also the dilemma facing regulators in Victoria, home to Crown Melbourne, and Western Australia, home to the company’s other operating casino, Crown Perth, who have been embarrassed by their failure to detect and stop the misdeeds and illegalities exposed in New South Wales.
Federal MP Andrew Wilkie of Australia’s Independent Party, who provided the inquiry with a damning video purportedly showing money laundering in a Crown Melbourne VIP room, has called for the suspension of both the Melbourne and Perth licenses.
That, however, is highly unlikely.
A spokesman for the WA Gaming and Wagering Commission said only that the agency was “engaged in the inquiry and will consider its position in relation to Crown Perth once the findings of the inquiry have been handed down.”
The Victorian Commission for Gambling and Liquor Regulation said it was aware of the submissions made by counsel and it would be “a matter for Commissioner Bergin to report on suitability, including what changes would be required to render relevant persons suitable.”
Crown Melbourne was shut down in late March in response to the Covid-19 pandemic and was only cleared to reopen under limited capacity last week.
Crown Perth reopened in June.
Crown, in the meantime, has yet to submit a formal response to the inquiry, and outside counsel advising the company said it will not do so before the ILGA meets.
The company is, however, armed with a number of legal options if it decides it doesn’t like the outcome. These are based on a tangle of agreements Crown and Packer struck with the NSW government when it negotiated the license in 2014 and which could find the state on the hook for hundreds of millions of dollars in compensation if it imposes conditions that adversely impact the company’s revenues.
It’s reported that Crown’s internal counsel is already preparing a case alleging violations of due process.
